Heartland to bear the brunt of a hard winter

BRITAIN FACES a long cold economic winter, with mounting job losses in manufacturing.

Turmoil in the Far East and the strength of the pound can only result in more plant closures.

Yet as the heavy industries continue to contract, thousands of jobs are being created in the service industries such as the banks, supermarkets, and in the ubiquitous call centres springing up everywhere.

While the big-name closures in Britain's traditional industrial heartland grab the headlines, government figures show that about 250,000 more people are in work now than in May last year when Labour came to power. Traditional black spot areas will continue to suffer the worst, including parts of the Midlands, the North-west and especially the North-east where the shutdown of the Siemens and Fujitsu factories brought home the seriousness of the decline in manufacturing.

At the TUC conference in Blackpool this week, ministers brushed aside calls for intervention to bring down interest rates, which have sucked in foreign money, led to the high value of sterling and pushed up the prices of British goods.

A week's shutdown of the Hoover plant in Merthyr Tydfil and the threat of lay-offs among the 1,000-strong workforce, as well as the closure of a British Steel rolling mill at Rotherham announced yesterday, can be blamed partly on the strength of the pound.

Employment in manufacturing has fallen by more than 30,000 since May whenexchange rates firmed.

Until recently exporters have kept going by accepting lower profit margins, but there is a limit to their forbearance.

There has also been a steep drop in domestic demand with high street retailers faced once again with mounting stocks. Shoppers are simply not buying high-priced British goods - another strong element in the problems hitting Hoover.

Faced with an economic meltdown, Asian manufacturers are selling goods at rock-bottom prices and British businesses are unable to compete.

Consumers are also having to cope with a steep rise in the cost of living. Typical mortgage repayment have increased by 25 per cent in a year and higher indirect taxes have contributed to the misery.

"People are not spending and they are not borrowing," said Ian Brinkley, a senior TUC economist.

There is great political sensitivity over job losses in the North-east where several leading members of the Government, in addition to the Prime Minister, have their constituencies.

The closure of the pounds 1.1bn Siemens electronics plants on North Tyneside with the loss of 1,100 jobs and the shutdown of the Fujitsu factory in Mr Blair's Sedgefield constituency were prompted primarily by the worldwide collapse in semi-conductor prices.

Some workers at Vickers' Leeds plant, where 650 jobs are going, suggested that political considerations may have meant that the Newcastle factory was favoured at the expense of Leeds.

Economists believe that men working full time will be the main victims of the economic downturn, owing to the sectors in which they tend to work.

The new jobs will emerge in the service sector, such as the call centres being established by banks and finance companies to maintain regular contact with their customers and cut costs.

These centres are employing low-paid female staff rather than the higher earning males who have lost their jobs in manufacturing.

Yesterday's announcement that a leading US bank is to base its pounds 50m UK headquarters in the Cardiff Bay development, creating 1,000 jobs, on the same day that the Vickers said it was closing the Leeds tank factory, is the clearest possible example of the changing employment patterns.

Most observers argue that the present economic problems will prove a pale shadow of those experienced in the early 1990s.

Ministers have rejected calls this week for a change of course in economic policy or the early cut in interest rates being demanded by manufacturing.

Earlier in the week Eddie George, Governor of the Bank of England, told the TUC that the Bank recognised the problems of "internationally-exposed businesses," but held out no hope of altering the tight monetary policies.